Duff on Hospitality Law

Victoria Slade practices in the areas of employment law and litigation. She represents employers with unionized and non-unionized workforces. She has advised employers in compliance with various state and federal employment ...

In a 43-page ruling issued late Tuesday, Federal Judge Richard Jones denied the International Franchise Association’s (“IFA”) bid to prevent Seattle’s Minimum Wage Ordinance’s franchise provision from going into effect as written. As a result, starting April 1, most franchisees in Seattle will be treated as “large” employers under the Ordinance, meaning they must pay the higher initial rate of $11 per hour. They also will scale up to the $15 minimum wage in just three years, much more rapidly than small businesses. While this is not the end of IFA’s case attacking the franchise provision, it is a big setback and a strong indication that IFA is unlikely to ultimately be successful.

IFA had sought a preliminary injunction, challenging the Ordinance’s definition of “large” employers as including all franchisees that are part of a chain with more than 500 employees anywhere in the nation. It argued that franchisees are more like small businesses, because individual locations are separately owned and have far fewer than 500 employees. It argued that, by lumping small franchise owners together with large businesses, Seattle was putting franchisees at a competitive disadvantage. It further alleged the City had intentionally discriminated against franchisees because of its preference for local businesses. This discrimination, if proved, would be a problem because states and cities are not allowed to enact legislation that is intended to or has the effect of favoring local businesses over out-of-state businesses. IFA’s motion, if granted, would have put a temporary hold on the franchise portion of the Ordinance and required that franchisees with fewer than 500 employees be treated as small businesses until the case was fully resolved, which could take until the end of this year. The Court heard three hours of oral argument on the motion last week.

The Court’s Order rejected each of IFA’s legal theories. In sum, the Court found:

The Ordinance is not discriminatory as written because it applies equally to franchisees whose corporate headquarters are in Seattle.

The Ordinance does not have a discriminatory purpose. The stated purpose of the minimum wage hike is to reduce income inequality and promote the general welfare, health, and prosperity of Seattle workers, and the rationale for differentiating between small and large businesses is the recognition that large businesses will have less “difficulty accommodating the increased costs.” Although IFA argued that comments by a member of the Advisory Committee to the Mayor regarding “extractive national chains” revealed an ulterior motive to harm multi-state businesses, the Court gave these comments little weight. It reasoned that this was a “politically charged” issue with impassioned debate, “fervent remarks,” and lobbying on both sides, making it improper to focus so heavily on a comment by one member of the public. It also rejected IFA’s argument regarding statements by members of the City Council, reasoning that the statements, even if they were discriminatory, were “insufficient to override the entire City Council’s formal statements of purpose in the Ordinance itself.”

The Ordinance does not have a discriminatory effect on franchisees. To invalidate the franchise provision under this argument, IFA had to prove the Ordinance would harm franchisees so much that the ultimate effect would be that local goods would have a larger share of the market than goods that come from out of the state. The Court found IFA had only argued potential, rather than actual, harm to franchisees and refused to “speculate or to infer discriminatory effect without substantial proof.” Although IFA had argued that franchisees would be forced to close up shop or that new franchisees would not open in Seattle, there was insufficient proof of this. Moreover, the Court noted, there was some evidence that franchisees would not be harmed because they could draw upon the “greater financial resources” of their franchisors to support them during times of business stress. Even if the court did assume there would be some negative effect on franchisees from the law, this burden would not override the local benefit from assisting low wage workers, and, in any event, the court stated, “it is not the court’s place to second guess the reasoned judgments of the lawmakers who studied and analyzed this issue as part of an involved legislative process.”

There was no equal protection violation because it was rational for the City to believe franchisees would be able to tolerate the increased wage better than small independent businesses. The court pointed to economic benefits from the franchise relationship, such as national advertising, valuable and well-known trademarks, reduced cost for supplies and raw materials, training, and a network of other franchisees who provide valuable business advice. The Court also pointed out various benefits that individual plaintiff franchisees had acknowledged, such as one Holiday Inn franchisee’s use of a large on-line reservation system and access to a loyalty reward system with 74 million members worldwide.

The Court also rejected IFA’s other arguments, including its First Amendment claim, its argument that the Ordinance was preempted by federal law on copyrights (the Lanham Act) or health plans (ERISA), and its claim under the Washington State Constitution’s Privileges and Immunities clause. For each, the reasoning was essentially that these theories, while in some cases “novel and creative,” were not well-supported under the law and were otherwise unpersuasive, given the court’s reasoning on some of the previous claims.

Overall, the Court found IFA did not prove it was likely to win on any of its arguments. Although it was “sympathetic to the concerns of franchisees,” it also found that any harm from the Ordinance taking effect was speculative and not supported by the evidence. It also balanced the harm to franchisees against the “concrete harm” to low-wage employees if they lost the expected wage increase and found the equities did not support the requested injunction. Finally, in a serious blow to IFA’s chances at ultimate success in this case, assuming it goes forward, the Court found IFA had failed to raise “serious questions” showing it had a “fair chance of success on the merits.”

Although this ruling is not the end of the case, Judge Jones’ thoughtful and comprehensive analysis of IFA’s claims is a strong indication that IFA will not ultimately be successful while the lawsuit is before Judge Jones. If you have any questions on this ruling, the IFA litigation, or Seattle’s Minimum Wage Ordinance in general, please contact me, Diana Shukis, or Victoria Slade.

Are your employees using company email during nonworking hours? Victoria Slade, member of our Labor and Employment Group, brings us the latest developments in NLRB’s ruling and important policy changes that employers can implement to comply with the ruling. Thank you, Vicky! – Greg

As you may have heard, the NLRB recently ruled that employees who are given access to their employer’s email system for their jobs must be permitted to use that email system during nonworking time to engage in protected activity, such as forming a union or discussing terms and conditions of employment. This ruling applies to both unionized and non-unionized workforces. The ruling has caused some controversy because it overturned long-established precedent. It is not, however, a reason to panic. Employers who are already complying with the NLRB’s guidance on social media need only make a few changes to their policies.

The case is called Purple Communications, Inc., and all 70-plus pages of the order are available here (under “Board Decision” dated 12/11/2014). The rule before this case was that an employer had the right to restrict non-business use of its email system, so long as it did so in a non-discriminatory fashion. In Purple, the Board held that employees must be granted access to use their employer’s email system during nonworking time to engage in protected activity, such as discussing terms and conditions of employment. Employers with a strict rule that work email is for business use only will therefore need to revise their policy to allow employees to use company email during nonworking time to engage in protected activity. There are some limited exceptions to this rule, for circumstances where permitting use of company email for protected activity will seriously disrupt productivity or business operations. If you think this is the case for your business, please contact us, and we can help you craft a policy that should satisfy the NLRB.

If, like many employers, you already allow non-business use of work email during nonworking time, this decision still impacts you. Most employers have some kind of policy that regulates what employees can do on the company’s email and other communication systems. Because the Purple ruling requires employers to allow employees to use company email to engage in protected activity, restrictions that infringe on this right are no longer OK. This, too, is no reason to panic, however, because it simply means your use of technology policy has to look a bit more like your social media policy (you have one of those, right?). As discussed in the blog posts available here, the Board has already issued a series of rulings and memoranda explaining how it will evaluate social media policies. Generally speaking, the Board has stated that a policy will be struck down if it could be read by a reasonable employee to prohibit protected activity, such as engaging in collective action or discussing conditions of employment.

Although Purple Communications was a dramatic opinion, in that it overturned decades of previous Board law, it should not be difficult for businesses to adapt.

If you have any questions about how to comply with this decision, we would be happy to help. Please feel free to contact me or Vicky.

While the antidiscrimination laws that protect transgendered individuals are not new, the subject of gender identity may be new to your managers. This post is intended to provide a very basic understanding of transgender issues to get employers off on the right foot for appropriately, sensitively, and lawfully handling gender expression issues in the workplace.

Defining Basic Terms

Broadly speaking, “gender expression” refers to the way people manifest masculinity or femininity. This can be through clothing, hair, makeup, overall appearance, speech, or other behavior or form of personal presentation. “Gender identity” refers to a person’s innate sense of being male or female. When someone is “transgender,” it essentially means their gender expression or identity is not consistent with societal expectations of someone with the same assigned sex at birth. “Sexual orientation” is a person’s physical and/or emotional attraction to the same or the opposite gender. Although sexual orientation and gender identity are often discussed together, they are not the same: a person’s gender identity has nothing to with their sexual preference, just the same as it has nothing to do with their age, race, or ethnicity.

Unlike the broader, umbrella term transgender (sometimes shortened to “trans”), “transsexual” specifically means someone who strongly feels that they do not embody the sex they were assigned at birth and has changed, or is in the process of changing, their sex to correspond to their sense of gender identity. These individuals often pursue medical options, such as surgery or medication, in order to align their physical characteristics with the gender with which they identify. When a person undergoes a process of medically, legally, and socially changing gender, this is known as a “transition.” A transition may or may not involve a “gender reassignment” (also known as “gender confirmation”) surgery.

One thing many people do not realize is that not every transgendered person necessarily identifies as the opposite sex or has any desire to change his or her body. In fact, a transgendered person may not identify as any gender at all but actually prefer to avoid restrictive notions of male or female altogether.

Tips for Being an Ally to Your Transgendered Employee

Use respectful language. It can be difficult to know the proper terminology to use when talking to or about a transgendered employee. A lot of terms are out there in the media, but not all of them are considered respectful. Avoid stigmatizing words like tranny, transvestite, hermaphrodite, and sex-change surgery.

Learn and use the proper pronoun. You should always call a trans person by his or her preferred name and chosen pronoun. If you don’t know their preference, it’s okay to respectfully ask the employee which pronoun they prefer, or how you should refer to them. If you do screw up a name or pronoun, just apologize and move on; making a fuss about it will likely be perceived as awkward or offensive. Along the same lines, ensure that an employee who recently disclosed that they are transgender is provided an updated name tag, uniform, business cards, etc. and that they are entered into internal and external systems with their preferred name and gender.

Do not ask them if they have had gender reassignment surgery. This is a very private subject and should be treated the same way you would treat any employee’s medical issue. The same goes for hormone replacement therapy or any other medical treatment. Just because someone is transgendered, it doesn’t mean they want to talk to their boss or coworkers about their body.

Keep it confidential. Be aware that a trans person’s name or gender on their driver’s license or other state or federal documents may be incongruent with their appearance or preferred name and pronoun (for example, when a person named “Steven” on legal identification presents as female). If this occurs, do not confront or “out” the transgendered employee. It may be necessary to note the trans employee’s legal name in formal employment documentation, but there is no requirement to use that same name in the workplace environment - think of how often people go by nicknames or middle names rather than their given first name. An employee’s status as transgendered should only be shared with those with a clear need to know, unless the trans employee prefers otherwise.

Give the employee safe and private spaces. A question that always comes up with regard to transgendered employees is which bathroom they should use. Simply put, the transgendered individual should be permitted to use the restroom of the gender with which they identify. This is true regardless of whether they have had gender reassignment surgery. If another employee objects, that person should be reminded that this valued employee has the same right to use the restroom as all other employees. As for locker rooms, the trans employee should be provided a private area to change (either within the regular public locker room or in a separate area) or be given a separate changing schedule.

As an employer, you are responsible to ensure that both your managers and your other employees are treating transgendered employees respectfully. As with most things, the tone you set at the top will make a big difference in how the rest of your employees behave. (It’s also something that judges and juries give a lot of weight to when considering whether a company is responsible for an alleged hostile work environment against a transgender employee). That said, teaching respect and sensitivity to your employees is not necessarily easy or simple. If you have a transitioning employee, you may want to schedule a transgender awareness and sensitivity training to educate employees about trans issues and teach them how to respectfully interact with their transgendered colleague.

If you are experiencing issues with gender expression in the workplace or have any questions on the subject, feel free to contact me or Greg.

As the school year begins again, it is a great time for hoteliers to think about their unpaid internship programs. Unpaid internships can be great symbiotic relationships. College students or individuals trying out new fields are willing to work for free in exchange for real-life work experience and something to add to their resumes. However before accepting free labor, employers must be aware of the potential consequences of this relationship and take steps to ensure their internship program complies with the law.

The Fair Labor Standards Act (FLSA) is a federal statute that requires companies to pay all employees a minimum wage and overtime. Who counts as an “employee” is a tricky question and some companies who thought they had unpaid “interns” found out the hard way that they actually had “employees” they were not paying. A recent New York case that is getting a lot of attention is Glatt v. Fox Searchlight Pictures, Inc. In that case, unpaid interns who worked on the movie Black Swan brought a lawsuit claiming that they actually were employees and, as such, should have been paid minimum wage and overtime for their 50-hour weeks. The interns had performed routine administrative tasks such as making photocopies, running errands, ordering lunch, and getting people coffee.

Sounds like typical intern work, right? Wrong. The Federal District Court held these individuals did not categorize in the FLSA exception for interns because their work was purely routine and did not further their education in the way a true internship should. The court also found it was the employer, not the interns, who got the better deal, deriving the most benefit from the relationship. Significantly, the court also held the interns performed work that otherwise would have been done by regular employees, thereby permitting the employer to get the same amount of work done with fewer paid workers. Even though the interns had agreed to serve without pay, the court found overall that the interns were employees and should have been paid wages and overtime. This case is not a fluke — there have been a number of similar intern-related cases lately.

In ruling in favor of the interns, the Glatt court followed a Fact Sheet from the Department of Labor (DOL) detailing a test for whether an internship is exempt from minimum wage laws. To see if your internship program is kosher under the DOL guidance, check out these requirements for a legal unpaid internship:

Must be educational. The internship, even though it includes actual work for the company, must be similar to training that would be given in an educational environment. This factor is often satisfied when the program is for course credit and when there is a degree of oversight by the intern’s educational institution.

Must benefit the intern, not the company. This is key. The internship experience must be set up for the primary benefit of the intern. The company must not derive immediate advantage from the activities of the intern; in fact, its operations should potentially be impeded by the intern’s presence.

Must not displace regular employees. Interns cannot be used to displace or substitute regular employees or to supplement the workforce during times when the company would otherwise hire more employees or ask existing employees to work longer hours.

Must not be a job interview. The intern cannot necessarily be entitled to a job at the conclusion of the internship. The internship should be for a fixed period of time, established prior to the outset of the internship, with no expectation that it will lead to a permanent position.

There must be no expectation of wages. Both the employer and the intern must understand that the intern is not entitled to wages for the time spent in the internship.

In short, based on the above federal guidelines (which Washington state closely follows), it is fine for a company to have an unpaid intern, provided the intern — not the company — is the primary beneficiary of the program. To ensure the company is not deriving benefits from or depending on the intern’s work, the company should ensure the intern’s duties don’t regularly include routine operational tasks, such as janitorial work, clerical work, or work that other employees would normally perform. The company should also make sure the intern is closely supervised, receiving more supervision than regular employees, and should give the intern plenty of training opportunities. If the intern is doing operational work, the company should ensure he or she is learning skills that would be transferable to another company, rather than skills that are specific to the company’s own operations. Finally, the company should consider requiring the intern to sign a document expressly stating that he or she is an intern and not an employee, that the internship is unpaid, and that the intern is not entitled to a job at the conclusion of the internship.

For businesses that use social media to vet job applicants or to monitor employees, change is afoot. On Tuesday, May 21, Governor Inslee signed into law a bill that makes it illegal for any employer in Washington State to require an employee or applicant to provide access to his or her social media account. This law covers any employer with one or more employees, and it goes into effect July 28, 2013. Here’s the scoop:

The law prohibits employers from requesting, requiring, or coercing a current employee or job applicant into doing any of the following:

Giving the employer the login information to a private social media account

“Friending” a manager or other third person so the employer can view the individual’s account

Requiring that the employee change his or her privacy settings to make the account publicly available

Logging into the account in the employer’s presence so as to enable the employer to view the content

The law also expressly prohibits employers from taking any “adverse action” against an employee for refusing to engage in any of these prohibited acts. This means firing, refusing to hire, or disciplining the employee or applicant, or threatening to do so.

There is a narrow exception to the law for when access to an account is necessary for the company to make a factual determination during a workplace investigation. This applies only if the employer has information that leads it to believe (1) that some content on the employee’s account might violate the law, regulatory requirements, or prohibitions against employee misconduct, or (2) that the employee has disclosed the employer’s confidential information on the account. Even under these circumstances, however, the employer still may only ask to view the account – it may not request the employee’s password.

This law does not apply to a work-focused technology platform primarily intended to facilitate communications and collaboration among employees, such as an in-house intranet or social network. It also does not prevent the employer from requesting login information for an account, service, or device the employer provides or pays for or that is only provided by virtue of the employment relationship. The law also will not apply if the employer unintentionally learns an employee’s login information, such as through a company mobile device or program monitoring the employer’s network, so long as the employer does not use the login information to access the employee’s social networking account.

Violations of this law can have serious ramifications. Employees may bring a civil action against employers who violate the law and, if they win, will be entitled to a $500 statutory penalty, any actual damages suffered, and – importantly – reasonable attorney’s fees and costs. An employer who is sued for a violation but prevails will only be able to recover attorney's fees if it can prove the action was frivolous.

Eleven states have now enacted laws of this nature, and similar legislation is being considered in over thirty more. If you have any questions about this development or how this law impacts your business, please don’t hesitate to contact me, Diana Shukis, or Greg Duff.

The rash of NLRB guidance and new protections for employee social media activity discussed in my previous posts may make employers shy about taking corrective action based on an employee’s social media postings. While employers should always be careful in these situations, however, the mere fact that something is posted online does not make it “protected.” Recent examples in the news are a great reminder that where a posting is vulgar, offensive, or airs a petty grievance without implicating employees’ rights to discuss the terms and conditions of employment, the employer can and in many cases should discipline the employee. Where a posting is less offensive, however, the employer should tread carefully, as unpopular personnel decisions can also draw serious scrutiny.

It’s been a busy month on the social media front with judicial, legislative and regulatory activity. With all this activity, it seems appropriate to give everyone a brief update on some of these recent developments and their effects on the guidance I provided in my previous posts.

Accessing Social Media Accounts

California has now joined Illinois and Maryland in banning employers from requesting social media passwords from current or potential employees or from requiring that employees log in while in the employer’s presence. Other states with pending legislation on this subject include Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Ohio, Pennsylvania, South Carolina and Washington.

Because this trend is sweeping the nation, employers in any state should be careful and not request that employees divulge their social media passwords or otherwise pressure employees into granting access to social media accounts. This is good advice not only because of the legislative action, but for common sense reasons. Accessing an employee’s private social media account can lead to, among other things, the discovery of the employee’s membership in a protected class or the employee’s protected concerted activity, the employer’s knowledge of which could cause problems if the employee is later disciplined. In other words, ignorance is bliss. This is especially important to remember as the election draws near and employee use of social media to express political beliefs becomes more and more frequent.

Remember when Facebook was just for college kids? Well, things have changed. These days it seems like even giant companies are using social media to show their warm and fuzzy sides and to connect with customers. Obviously, the CEOs of these companies are not spending their time maintaining the accounts and posting clever comments. On the contrary, companies usually dedicate one or more employees to speak on behalf of the company, through a company-sponsored Facebook, Twitter, or other social media account. If done right, an account can build up thousands of followers and grow to host useful information, photos, or communications, becoming an important resource for customers.

But what happens if the employee who is running a company-sponsored account quits? In a perfect world, that employee would gladly relinquish control of the account back to the company. But what if the employee leaves on bad terms? What if the employee leaves for a rival company? What if the employee changes the password and starts posting negative comments, confidential information, or trade secrets? Sorry to get all lawyer-y, but these are the questions that keep me up nights.

If you are anything like me, you have been eagerly awaiting another update from the NLRB on its social media decisions. Well, wait no longer. On May 30, the NLRB’s Acting General Counsel issued a third report on recent social media cases. This complements the two previous reports from January 12, 2012, and August 18, 2011. For more information on the first two reports, see my recent post.

The new report does not offer any groundbreaking new principles for employers seeking to implement or enforce social media policies. This is good news, as it means that you don’t need to rewrite your social media policy every time the NLRB issues a report. This report does elaborate on a few of the key principles, however, and it offers some new and interesting examples. It also includes as an example an entire social media policy that was found lawful.

Thanks to the internet, a single disgruntled employee can now do dramatic damage to a company’s image through posts on social media sites. (Just ask Domino's Pizza or Hotel Renaissance.) The social media policies employers have instituted in the last few years may work to inhibit online employer-bashing; however, they can also come perilously close to violating the law. To assist employers in navigating this rapidly changing area of law, the National Labor Relations Board (“NLRB”) has issued two social media reports in the last seven months, explaining their rulings in several recent social media cases. As this posting demonstrates, even if you think you have a good social media policy, you may want to revisit it, given the latest NLRB guidance.

Employees in both unionized and non-unionized workplaces have protected rights to certain types of speech under the National Labor Relations Act. These include, briefly, the right to discuss terms and conditions of employment and unfair labor practices with coworkers and the right to engage in concerted activity. Employers who want to restrict employees from making disparaging comments about the company online must carefully phrase their policies to avoid trampling on these rights.

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Greg Duff, EditorGreg Duff founded and chairs GSB’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.